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JPAM Featured Article: Do Higher Minimum Wages Benefit Health? Evidence from the UK

May 25, 2017 08:00 AM

As part of our ongoing effort to promote JPAM authors to the APPAM membership and the public policy world at large, we are asking JPAM authors to answer a few questions to promote their research article on the APPAM website.

By: Otto Lenhart, Ph.D.

In this article, your research focused on the health implications of an increased minimum wage. What data did you consider and what spurred your interest in this research?

For the research, I used data from the British Household Panel Survey (BHPS), a publicly available, nationally representative panel survey of private households in Great Britain that started in 1991.

I started working on this project in the third year of my Ph.D. program in Economics at Emory University (2011 to 2016). It turned out to be one of the chapters of my dissertation. Soon after completing the mandatory course requirements in my first year of graduate school, I became interested in the field of Health Economics, with a specific interest in policy-relevant research that looks at income assistance programs. It quickly became clear to me that I wanted to write my dissertation in Health Economics.

While having become very familiar with research on the relationship between income and health and after having completed my first paper examining whether a causal link between income and health exists, I started reading newspaper articles about the introduction of a first minimum wage in my home country Germany on January 1, 2015. I became curious if there had been any previous work on the association between minimum wages and health outcomes. Based on my expectation, a positive association between minimum wages and health exists and I was expecting previous papers to have provided evidence for this. While not finding only finding a few published papers that looked at the effects of minimum wages on traffic accidents and obesity, I found a blog entitled “Raising the minimum wage could improve public health”, by Professor J. Paul Leigh (UC Davis), which was available online as part of the Economic Policy Institute. The blog post suggest that minimum wages could affect health outcomes, consistent with my expectations.

From then on, I started working on this project. While many countries, such as the U.S., have had minimum wages in place for many decades, I found that the U.K. only introduced their National Minimum Wage (NMW) in 1999. After conducting a thorough background analysis, I decided to examine whether this policy introduction in the U.K. influenced health outcomes of affected workers.

Were there any challenges to conducting your research, either internally or externally?

To be honest, I cannot recollect any major challenges while conducting the research. I was very fortunate to receive great support from my advisor Dr. Sara Markowitz at Emory University, who listened to my ideas and gave me constructive feedback. In addition, I presented earlier versions of this paper at the “2nd SDU Workshop on Applied Microeconomics” at the University of Southern Denmark (Odense, Denmark) and at a Brown Bag Seminar Series in the Economics Department at Emory University. The feedback I received at these presentations was very helpful in improving the quality of the paper.

Were there any surprises found while conducting the research on minimum wage and health benefits?

Overall, the findings confirmed my general expectation that higher minimum wages can potentially lead to health improvements for parts of the population. As mentioned above, one of biggest surprises was that there had not been more research conducted at the time when I starting with this project in 2014. Having said that, this has changed drastically in the last couple of years as there have been several recent studies that have examined the association between minimum wages and health outcomes such as physical health, mental health, and infant health.

In your article, you note that minimum wages can affect health through several channels. Can you offer examples?

The study provides evidence that minimum wages can influence health outcomes by affecting people’s health behaviors. I find that individuals are less likely to smoke and more likely to have a membership in a sports club, which could indicate increased physical activity. Another potential channel is the effect of minimum wages on the levels of financial stress that individuals are confronted with. I find that workers who are benefiting from higher minimum wages are less likely to be worried about their financial situation and increase their spending on leisure activities, such as vacations. Early evidence in the medical literature has shown that stress is closely linked to a number of adverse health outcomes.

What is the main conclusion of your research regarding the health benefits and raising minimum wage?

The main conclusion of the study is that minimum wages can positively impact health outcomes of low-wage workers. Thus, the research indicates that future evaluations of minimum wage policies should also consider any potential health effects.

What would be the ideal next step for your research findings? How would you like to see your findings implemented?

The next step would be to test whether similar health effects are observable in other countries, such as the U.S. While a few recent studies have examined the relationship between minimum wages and health in the U.S., the evidence is mixed. It would be interesting to test whether health impacts of minimum wages become smaller or even disappear if minimum wages reach a certain threshold level. Additionally, it would be interesting to learn more about the pathways that link minimum wages and health outcomes. As the findings in my study suggest, there is not one mechanism, but potentially a combination of several different channels. I believe there are a few more pathways that have not been examined so far.

I would like that the findings from this study create an awareness of the fact that higher minimum wages cannot not only improve the financial situations of workers, but also affect their health outcomes. This should be considered by policymakers when discussing the costs and benefits of potential changes to existing minimum wages.

Author's Bio

Otto Lenhart, Ph.D., was born in Hamburg, Germany. After finishing his high school in Germany, he came to the U.S. in 2008 on a tennis scholarship. In 2011, he received a B.A. in Economics and Finance and won the Division II National Tennis Championship with the team. After completing his B.A., he started working on his Ph.D. in Economics at Emory University, which he completed in May 2016. Currently, he is working as an Assistant Professor in the Department of Economics at the University of West Florida in Pensacola. His research interests include Health Economics, Labor Economics and Public Economics.

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